Mike Shatzkin ponders near-future of publishing under DoJ settlement

Publishing industry consultant Mike Shatzkin has posted a look on his blog at what the settlement terms could mean for the near future of publishing as the publishers who’ve settled put the required contract changes into effect. Assuming things move forward at all speed, the terms could be in effect as soon as mid-September, well in time for the holiday season.

Although Shatzkin was a fairly vocal critic of the settlement in past columns, he doesn’t waste any time complaining about the DoJ’s decision to let it remain unchanged. Instead, he talks about the business models publishers might consider implementing, and possible contract terms. Even the publishers continuing to use agency—Macmillan and Penguin who aren’t settling, and Random House who didn’t collude—may have to make changes in light of what the other half of the Big Six will be doing.

One of the most interesting parts for me is this, however:

It is back to the drawing board for new agreements. Ostensibly they can be “agency” agreements by which the publisher sets a price and pays a commission for sales based on that price. But since agency agreements were actually attractive because they achieved what is now deemed illegal price parity across the marketplace, these publishers must be rethinking the efficacy of the model. I would be.

In this, as well as a couple of other places in the column, Shatzkin basically admits that the only reason agency pricing worked was that everybody was doing it. However, he thinks that evidence for actual “collusion” was still pretty weak, given that Apple had told the publishers it would need at least four of them to sign on in order to be able to launch its iBookstore:

It seems that the necessity for concerted action to make agency work is a core element of DoJ’s thinking that collusion was required to implement it. But the specific allegations of collusion (the Picholine meeting that took place long before anybody was thinking about agency or an Apple bookstore and the various instances where publishers are alleged to have told each other whether they were in or out of the program) seem very weak, particularly when you acknowledge that they all knew “four or no store”.

Even so, I still think it’s kind of ridiculous on the face of things to think that the publishers would have been willing to implement it individually if they hadn’t known for certain everyone else was going to as well. It’s a publishers’ prisoners’ dilemma: if they raised their own prices and dropped their own cut of the profits at the same time everyone else didn’t, everyone else would be selling more books and making more money (though, granted, much of it in Amazon subsidies) at their expense (as Random House did for the first year of agency pricing). Their investors would go nuts. Why would any of them be willing to take that kind of risk on its own?

Besides, does it really matter whether the collusion was o

This could be an interesting holiday season if Amazon is allowed to get back up to its old tricks with three of the Big Six’s e-books, especially if its new models of Kindle Fire are even more popular than the original. Exciting times may be just ahead!

TeleRead Editor Chris Meadows has been writing for us--except for a brief interruption--since 2006. Son of two librarians, he has worked on a third-party help line for Best Buy and holds degrees in computer science and communications. He clearly personifies TeleRead's motto: "For geeks who love books--and book-lovers who love gadgets." Chris lives in Indianapolis and is active in the gamer community.

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